Follow the Smart Money / COT Analysis

Hi medici,

Thank you for sharing your view!
You are right about fx market, no question to that, OTC is a much greater market in fx. On the other hand, if you look at that Commitments of Traders report on currencies you will find that COT analysis can be used effectively. Just to give you an example, have a look at the chart of the Australian Dollar. The COT Extremes in this market are very useful signals.

Hi forexbroker4,

Thank you for sharing your view!
I think that you have not read my #12 post, in which I have more or less explained how I think COT analysis should be viewed. It is definitely not something to be used on its own, its effectiveness can be enlarged greatly be combining it with classical TA tools.

Anyone interested in the report should do a historical analysis using their existing system and testing it with the implemented COT analysis tools.

All the best,
Dunstan

Thanks for your reply. As I tried to say, I wasn't questioning that at all.

No problem! I hope you will stay and continue viewing my thread. I appreciate every future comments you may have.

Have a wonderful day,
Dunstan

I notice that we have COT data for NZ, but people don't analyze/plot NZ data at all? Not liquid enough? I like NZ because it has low margin.

Absolutely, you are right, there is COT data on NZ. Unfortunately the service I use does not show it. I will send them a letter to ask, whether they are planning to introduce it in the near future... would be nice to have it!

Hi hotaggie98,

I’ve just received their reply about NZ! They said that they are working on it and that hopefully in the near future it will be available on their site. They are also working on the Russian Rubel!

All the best,
Dunstan

Hi everyone,

The latest Commitments of Traders review is out (here)

Silver

It was interesting this week that all over metals, there were pretty large changes in the positions that Commercials, Large Speculators and Small Speculators are holding. These changes can be considered sell signals, but I think we should realize, that 2 month ago , there was a pretty bullish picture in the COT report for these markets, especially one in Silver (26th report - Commercials at a 563 report COT Extreme). The question here I think is to determine the difference in the strength of the two signals. In my opinion, a COT extreme picture could have a longer lasting effect, while a COT change signal has a shorter one. So following this analogy, if one took the signal in the 26th report and went long in metals, than it could be a good time to realize some profits and re-enter in a few days, when prices have dropped a little, since the COT extreme should have enough momentum left to push prices higher. Of course this decision should be in harmony with one’s trading system’s money management rules and trading strategy.

I have attached a 5-year chart on the 26th report for Silver and the most recent one as well. It is clearly visible that during this 2 month, the COT picture has moved away from those extreme levels. I guess we can start talking about a bearish picture again, once Commercials have reached 50.000 or more contracts net short and Small Speculators are holding roughly 15-20 thousand (or more) contracts net long.

Canadian Dollar

The changes in positions amongst all participants were relatively large. In my opinion the best picture would have been if these changes took the COT report to the extreme territories that the review was talking about, Commercials net short 100.000 or more contracts and Small Speculators net long 35.000 or more contracts. The extreme combined with the change signal would have been a very significant sell signal, but of course this change on its own could also be strong enough to push prices lower.

I wish all of you good luck to this week’s trading,
All the best,
Dunstan

the original COT report --> here
COT charts (free) --> here

CAD chart

Looks like Silver reacted to the Change signal a bit, but it is visible that the 2 month earlier COT extreme is still the one causing this strength.

Canadian dollar hasn't really done anything, still waiting for the Extreme in the COT to get a strong bearish picture.

It's Friday, so we shall have the 35th COT report out shortly.
I'll be posting on it next week!

All the best,
Dunstan

Hi everyone,

The latest Commitments of Traders review is out (here)

Silver
Not much changed from last week, the size of change in positions C, LS and SS are holding changed a bit more than average (actually metals were on top again). After last week’s signal, prices did drop a bit, but the COT extreme buy signal that happened 2 month ago is still pushing prices higher. I can’ really add anything new to this compared to my 1 week ago post --> we need to wait for an extreme in COT to start thinking about a downward turn in prices.

Nasdaq-100
The COT extreme that can be found in this market is pretty significant. LS are at All-Time extreme levels, but also C and SS are close to their all-time levels as well. I’m not a “big fan” of COT signals in indexes, in my experience these are the weakest signals compared to other markets, but in this case it looks as if the signal could affect prices. I have tried to find similar cases on the chart to see what happened to prices back then (see attached chart) and I could find some working cases. The close resistance level is also favorable for traders seeking a short opportunity.

I wish all of you good luck to this week’s trading,
All the best,
Dunstan

the original COT report --> here
COT charts (free) --> cft

Dunstan,

I also view COT for trading signals I am very happy you started this thread I will follow with great interest

Great news! Let me know if something is not clear, I'll try answering it fast.

All the best,
Dunstan

I just now became a forum member but use this site quite often for info. The information on COT reports that Dunstan started caught my eye. I'm not a big technical guy but of course use a couple of tools for scalping. I have not read to many replies but was going to share this link. If no one has seen it, it's quite interesting. It's long, but has good information on how the "Big Dogs" run in the FX market.


4xScalper

------------------------------
Slow and Steady wins the race

Hi,

Yesterday I received an e-mail from a fellow trader, who was asking me to write something about the relationship of cot data and currencies, so I thought I'll share it with you as well here.

Well first of all, CFTC publishes COT reports on many currency futures, so the basic relationship is this; you can have a look at major market participant’s positions on these markets as well. Of course one might ask, “who are the Commercials here?” Actually they are companies, who do business internationally and require the usage of different currencies than the ones they are using at home, so they are exposed to currency risks.

Does COT analysis work on currencies? My answer is: YES
Let me show you a chart on AUD. I have indicated some places on the chart, where a turn in price direction coincides with some sort of extreme in the COT.

Of course if you would like to trade a pair, where both currencies have futures and COT reports on them, you need to analyze both of those markets’ COT report and come to conclusion, since we don’t have COT report on currency pairs.

A little COT analysis on currencies for you:

AUD
A COT Extreme Sell signal in the report --> COT Index: C - 12%, LS - 91%, SS – 65%. Prices have already started to decline, the recent top is not far if you were searching for resistance levels for your stop.

GBP
We have no COT Extreme in the market. What is interesting though is that last week only SS thought prices could go higher, C and LS both cut back on their net long positions (look at the 1 yr chart, I have indicated it).

CAD
The extreme here is not as big as in AUD, but still large --> COT Index: C - 22%, LS - 84%, SS – 62%. The question is, would this extreme in the COT widen more or is this a relative top in prices. If the next COT report shows us that participants are moving away from their extreme territories, I guess that would confirm the top. One thing is for sure: base on COT analysis, the picture now is more bearish than bullish.

EUR
There was an All-Time COT extreme buy signal not long ago (indicated on chart), but could not push prices higher. Since then, C,LS and SS have moved away from their extremes. The fact that LS are in a buying mood (cutting back on their net short positions) is a bullish signal, on the other hand if this direction in COT would start to change and we would be witnessing another move towards extreme territories, I would be expecting prices to decline some more and I would be looking for buying opportunities, when we have reached these extreme levels, I would say, C at net long >250 000 contracts, LS < 200 000 contracts and SS <40 000 contracts.

JPY, CHF
Nothing special, we don’t really have any COT signals now.

MXP
Similarly large COT extreme as in CAD --> COT Index: C - 23%, LS - 77%, SS – 67%.
The picture is bearish.

All the best,
Dunstan

charts: Report35_GBP_5yr, Report35_CAD

charts: Report35_EUR. Report35_MXP

Just read through the entire thread.

Nice work Dunstan! I am now a subscriber to this thread and will check back frequently. Keep up the good work!

Thanks! I'm glad that you have decided to join my thread.

All the best,
Dunstan

I join 100pips's words.....it s a very interesting thread with a brand new point of view. Thank you very much and keep on the good work!

WoW, great news! It's very supporting to see so many of you enjoying the thread. It is true that although the first COT reports have been published in the '80s, I find that even today the majority of traders still don't know about it. Since my experiences during the 5 years of using it are very positive, I thought I should share my knowledge to others!

I hope I could keep the thread interesting and useful to you in the future! You might see that I have already introduced the COT analysis tools that I'm using and shared some examples on them during the first couple of posts. Now I am concentrating on the recent reports to focus viewers' attention towards some markets where the COT report suggests trading opportunites.

All the best,
Dunstan